Homeowners are looking for skilled home repair professionals. Service providers – plumbers, remodelers, landscapers, etc. – are looking for customers. That match used to happen through word of mouth or perhaps a sign on a community bulletin board. Now companies like HomeAdvisor collect information about homeowners and then sell those leads to service providers. But an FTC administrative complaint alleges that HomeAdvisor deceived its members – including small businesses – about the quality and source of its leads, misled them about how often the leads resulted in real jobs, and used a deceptive “free trial” offer to reel in prospective members. It’s the latest FTC case to look behind the drywall at the often enigmatic business of lead generation.
Based in Colorado, HomeAdvisor – an affiliate of Angi – uses national advertising to draw homeowners to its site. Telling visitors they can “Find trusted local pros for any home project,” HomeAdvisor prompts them to answer questions about home projects and to provide their contact information. HomeAdvisor turns the information it collects from visitors into leads.
So what does HomeAdvisor do with these leads? You’ll want to read the complaint for the details, but the company sells the leads to businesses that join its network for an annual membership fee of $287.99 (plus the cost of leads).
According to the FTC, HomeAdvisor and its sales agents have assured prospective members that its leads are people looking to hire someone immediately for a project (“HomeAdvisor matches you with homeowners actively seeking the services you provide in your area.”). HomeAdvisor also has told service providers that the leads will match the type of work the business can provide and their geographic preferences (“Tell us what you do and where, and we deliver prospects that meet your exact needs.”). What’s more, Home Advisor has represented that the leads are people who sought HomeAdvisor’s help in finding the right service provider for their project (“Consumers come to HomeAdvisor .com and give us detailed info about their project.”).
That’s what HomeAdvisor claimed, but the complaint alleges that HomeAdvisor made numerous misrepresentations about the quality, characteristics, and source of its leads. According to the complaint, the leads HomeAdvisor sells include ones from site visitors who have specifically informed HomeAdvisor that they’re not ready to hire a service provider. Many of the leads HomeAdvisor sells businesses are for services the business doesn’t provide, either because it’s the wrong type of work or in entirely the wrong location. Indeed, according to the FTC, many of the leads that HomeAdvisor sold to unsuspecting businesses weren’t from people who had visited HomeAdvisor’s site looking for service providers for planned projects at all, but were names HomeAdvisor bought from third-party affiliates. The complaint also alleges that HomeAdvisor lured service providers in with deceptive claims that a high percentage of leads actually resulted in a job for the business.
Another approach HomeAdvisor used to attract businesses to pay for membership was a supposedly “free” one-month subscription to mHelpDesk, a $59.99 per month add-on service for scheduling appointments and processing payments. But according to the FTC, many new members who took HomeAdvisor up on that “free” offer were charged $347.98 – the $287.99 annual membership plus $59.99 for the “free” month of service.
The trial of the three-count complaint will be before an Administrative Law Judge. Even at this early stage, the filing of the action suggests two top-line takeaways. First, the FTC’s commitment to challenging deception in the marketplace includes illegal practices that affect small businesses. Second, as numerous FTC cases have established, long-standing consumer protection principles apply to the lead generation industry.